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A federal appeals court Friday threw out the Department of the Interior's 2007-2012 five-year oil and natural gas leasing plan - potentially halting development in the Gulf of Mexico and Alaska - telling the agency it needed to better consider environmental impacts.

The decision further delays exploration and development of Outer Continental Shelf resources at a time when energy analysts warn that more investment is needed in the sector to prevent price spikes in coming years.

An Interior spokesman couldn't immediately say what the impact of the ruling would be for development in lease sales already held under the five-year plan in the Gulf of Mexico, but lawyers who brought the case against the agency said it should definitely stop work in Alaska.

The Washington federal court of appeals upheld a coalition of environmental organizations' claims that the Interior Department's assessment of the environmental sensitivity of some areas was "irrational." The agency must first reconsider its assessment before moving ahead with the lease sale program, particularly acreage in the Beaufort, Bering, and Chukchi Seas off the coast of Alaska.

"This gives Interior Secretary Ken Salazar a legal reason to revisit these lease sales," said Peter Van Tyne, the lawyer who represented several Alaska native and environmental groups in the claim.

The American Petroleum Institute said in a statement that the ruling could deal a "devastating blow to the economy" if the decision delayed development of domestic oil and natural gas resources.

DOI spokesman Frank Quimby said Interior and Department of Justice lawyers were reviewing the decision, and hadn't yet ascertained the full impact of the ruling on its five-year program.

Oil majors Royal Dutch Shell (RDSA) and ConocoPhillips (COP), which have spent millions of dollars on Alaska lease sales and seismic surveys, couldn't immediately comment on the ruling and how it would affect their operations.

By Ian Talley, Dow Jones Newswires; (202) 862 9285; ian.talley@dowjones.com;